Applied Optoelectronics, Inc. (NASDAQ:AAOI) Has Found A Path To Profitability

Applied Optoelectronics, Inc. (NASDAQ:AAOI) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Applied Optoelectronics, Inc. designs, manufactures, and sells fiber-optic networking products in the United States, Taiwan, and China. The company’s loss has recently broadened since it announced a US$56m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$81m, moving it further away from breakeven. As path to profitability is the topic on Applied Optoelectronics' investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Applied Optoelectronics

According to the 4 industry analysts covering Applied Optoelectronics, the consensus is that breakeven is near. They expect the company to post a final loss in 2024, before turning a profit of US$22m in 2025. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 116%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Applied Optoelectronics given that this is a high-level summary, though, bear in mind that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Applied Optoelectronics is its relatively high level of debt. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in Applied Optoelectronics' case is 55%. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Applied Optoelectronics, so if you are interested in understanding the company at a deeper level, take a look at Applied Optoelectronics' company page on Simply Wall St. We've also put together a list of essential factors you should further examine:

1. Valuation: What is Applied Optoelectronics worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Applied Optoelectronics is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Applied Optoelectronics’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.